What happens when your profits sputter, your execution stumbles, your stock tanks, and your stumbles, your stock tanks, and your senior management is in tatters? If you're Claremont Technology Group, you look for a white knight.To complete in the fast-moving IT-services market, Claremont's other alternatives market, Claremont's other alternatives were to flawlessly execute and rebuild says Karen Fast, a Claremont senior vice president. But those things take time. We needed to grow fast enough to be a player in the market.One solution: a mergerLike a white knight, CompleteBusiness Solution Inc. (CBSI) came to Claremont's aid last April, offering an estimated $285 million in CBSI stock for Claremont's resources and clients. (The deal is expected to close this summer.)
   
In return, Farmington, IL- based CBSI will extend its service offerings and client base. This is CBSI's third such deal, having recently acquired two other integrators, Synergy Software Inc. and C.W. Costello & Associates.Headed by CEO and President Raj Vattikuti, CBSI is on a tear. With an eye on expanding beyond Year 2000 solutions, middle market IT consulting, custom software development, and staffing services and moving into enterprise widebusiness consulting, CBSI is buying its way into the market. But the company is no slouch.It ranked as one of Wall Street's most successful IPOs, with the value of its newly issued shares growing by an astounding 262 percent within nine months last year. As the companyÕs largest shareholder, the 47-year-old Vattikuti became worth more than $200 million. Now the India native's goal is nothing short of giving Big Five consultants a run for their money. Vattikuti envisions his company's sales growing to $1 billion form $275 million today.We really want to position ourselves in the marketplace as a value provider, he says. With the addition of Claremont, CBSI has 4,000 employees under its fold worldwide.Buy Rather Than Build But CBSI is playing a game of risky business. Its high-growth strategy could be easily backfiring. By acquiring other companies, CBSI also assumes their liabilities, which has contributed to investor nervousness and a sudden drop this spring in the company's share price. Yet the gamble might pay off. Vattikuti will either prove himself to be one of the industry's shrewdest leaders or become a victim of his own optimism.Like others, Vattikuti believes that now is an opportune time to grab new clients and extend his company's reach. But rather than take the less-risky growth approach of gradually hiring new staff and opening branch offices, Vattikuti wants CBSI to dive head first into new markets by acquiring established firms such as Costello, subsuming their customers and service offerings.Otherwise, Vattikuti says, for us to do the same thing internally would take another three to five years. By then we might missed the market opportunity.That kind of thinking has helped transform CBSI into an integration- service powerhouse. Vattikuti's strategy  is really accelerating margin growth and revenue expansion, says Moshe Katri , a director at UBS Securities. ÒHe promised investors that he'll grow the company. And he has basically executed on everything he's promised.In Search of Synergy Vattikuti founded the company a contract programming firm in 1985, with 10 employees. Following a highly efficient development and maintenance model, CBSI relies on its offshore application development centers in India. These centers allow CBSI to lower costs, ramp up staff quickly for new projects and offer round-the-clock production by juggling work in different time zones. The company has been targeting middle Ðmarket clients that post sales ranging from $500 million to $4 billion.Consequently CBSI has grown 30 percent annually. And, prior to its acquisitions, CBSIÕs more-than-80-percent customer renewal rate would have positioned the company to sell a wider range of services, if it had had them to offer.Faced with limited offerings, some CBSI employees jumped to consulting firms such as Claremont, which gave them a chance to develop new skills and raise their service capabilities to new levels. No wonder CBSI found Synergy Software so attractive.Founded as an offshoot of an IT unit of Borders Books and Music in the early 1070Õs Synergy offered services targeted at retail, kiosk, and online inventory. Those offerings eventually broadened to higher-end consulting focused on ERP implementation. Staff size at the Schaumburg, IL-based Company grew to more than 100 consultants, while sales grew 40 percent annually, reaching $15 million last year.Synergy President Tichard Early, now head of CBSI's integration committee, says management began to notice a consolidation of the IT-services industry, a phenomenon they felt would eventually leave only handful of players standing bad news for niche firm like Synergy.The year 2000 problem was driving customers to do things now rather than later, Early says. We decided that if we didn't make some moves quickly, success would pass us by.Synergy management looked at 15 merger partners but felt that none of them would answer crucial challenges. Then CBSI made them an offer, and Synergy felt that CBSI's global delivery and development capabilities could acts as a back-end delivery engine to complement out front consulting, Early says. Those are nice tools to add to our tool belt. Last November CBSI announced its acquisition of Synergy for an estimated $32 million in CBSI stock. People SkillsMeanwhile C.W.Costello & Associates was facing similar problems. The Wethersfield, CT-based integrator built up a solid consulting practice in the eastern and Midwestern U.S. with 750 IT professionals. With annual sales reaching $70 million, the firm began considering an IPO early last year in part as an exit strategy for company founder, Charles Costello.Through an introduction by the investment firm of Donaldson Lufkin & Jenrette, Costello discovered CBSI. We were impressed with their company and culture, says Ralph Durante, Costello's president and COO at the time. It looked like merging the company was a definite 2 plus 2 equals 5.Vattikuti is well respected, has a great way of talking to customers, and can deliver, says Durante, now a vice president at CBSI. He believes in the customer, he has a great work ethic, and he's a successful entrepreneur.Every meeting you kind of like (CBSI) more and more, and then you think, gee, I can work with these people.After sealing the Costello deal last January, Vattikuti attended a breakfast meeting with 60 Costello customers, quickly impressing them with his candor and sensible views, Durante recalls.Whether working with a customer, an employee, or a business partner, Vattikuti values long  term relationships, according to Kailash Khanna, a CBSI customer and IT director at the Society for Worldwide Interbank Financial.

Telecommunications. With customers, that means personally keeping in touch. Vattikuti goes out of his way to visit strategic customers and understand their needs.Back at Claremont success was quickly becoming a distant memory. The company seemed to be overheating form its own blinding growth. Sales had exploded 325 percent over three years, topping $76.3 million in 1997. That growth forced the company to increase the staff by more that 50 percent in a single year to 780 employees. Profits suddenly became elusive, while the company was beset with work force stress high turnover, and bad project management. Claremont's share value fluctuated wildly. Claremont was always hiring and building out its cost level which caused problems in putting its resources to work effectively, says Tai Archibold, an analyst at J.P.Morgan. The company lost sight of its infrastructure requirements to maintain business momentum..Then came a management shakeup Chairman and CEO Paul Cosgrave and CFO Dennis Goet both resigned, succeeded by Stephen Carsonm who was named president and COO, and Jerry Stone, who was name Chairman. Stone's assessment: We had a great growth rate but we didnÕt drop it to the bottom line,The company searched for answers. Executives felt that merging with another company would inject fresh energy, help bolster operations, and help achieve its grand ambition to become a global services company.Claremont executives began working with investment bankers Donaldson, Lufkin & Jenrette in a search for a partner. After exploring possibilities with various candidates, including a software company, an integrator, and a systems manufacturer, CBSI emerged as the prime suitor.CBSI had previously subcontracted with Claremont and was familiar with its business. There was good synergy,Claremont's Fast says. CBSI appeared very professional and career-oriented, and it offered a clear career path.Those ideas sat well with Carson. Who now emphasizes employee development Our people now understand that training is a budgeted item, he says.Vattikuti has also told Claremont management that he thinks travel disrupts the personal lives of his staff, so he tries to minimize it. When you hear those things, you see his facial expression, you hear his voice , and you know he isn't putting them forth lightly, Fast says.Managing Growth Running a fast-growing company like CBSI, especially one built largely through acquisitions, poses big challenges. Vattikuti thinks that good communication is essential to holding the ship on course and that it must start at the top.Some of the methods we are establishing to tackle this issue include developing the leadership so that the message can trickle down to all areas, he says. The company is also formalizing its communications structure form top to bottom and is using technology such as multimedia and video conferencing to enhance its capabilities.Finding and developing the right people for leadership positions is another one of Vattikuti's concerns. With the Claremont deal signed, CBSI boasts that it can now recruit form Big Five Firms. This spring, for example, the company name Tristan Hoag, formerly an Andersen Consulting director, head of ERP and named Tony Bruce, a former vice president at Deloitte & Touche, SAP practice vice president. According to Vattikuti, the company's deal making has strengthened CBSI's sales, marketing, and recruitment efforts to the point that it can grow another 30 percent without any additional investments.Even without the Claremont acquisition, there's a huge upside, says UBS Securities Katri. Vattikuti couldn't agree more: We are very bullish about growth moving forward. Courtesy: Solutions Integrator.